Registration of title and protection of interests - Interest...

Learning Outcomes

This article outlines the concept of overriding interests within the registered land system of England and Wales. After studying this material, you should be able to identify the main categories of overriding interests under the Land Registration Act 2002, particularly those listed in Schedule 3 which affect registered dispositions. You will understand the requirements for these interests to be binding on a purchaser despite not being entered on the register, focusing on short leases, the interests of persons in actual occupation, and certain legal easements. You should be able to distinguish overriding interests on first registration (Schedule 1) from those on subsequent registered dispositions (Schedule 3), apply the special priority rule in section 29 LRA 2002, and analyse the timing and evidential requirements for actual occupation at the moment of disposition. You will also be able to evaluate how overreaching interacts with potential overriding interests and how disclosure and protective entries (notices and restrictions) affect priority.

SQE1 Syllabus

For SQE1, you are required to understand how third-party interests are protected in registered land and which interests can bind a purchaser even without registration. A key area is identifying interests that override registered dispositions under Schedule 3 of the Land Registration Act 2002, with a focus on the following syllabus points:

• The principle of overriding interests as an exception to the mirror principle.
• The specific categories of overriding interests detailed in Schedule 3 LRA 2002.
• The requirements for short legal leases (Sch 3, para 1) to override, including periodic tenancies and the parol lease rule.
• The detailed requirements for interests belonging to persons in actual occupation (Sch 3, para 2) to override, including the meaning of 'interest', 'actual occupation', the date at which occupation is assessed, and the statutory exceptions.
• The specific conditions under which implied or prescriptive legal easements and profits à prendre (Sch 3, para 3) override, and the exclusion of express post-2003 legal easements and all equitable easements unless protectively registered.
• The interaction between overriding interests and the concept of overreaching.
• The difference between interests overriding first registration (Schedule 1) and those overriding subsequent registered dispositions (Schedule 3), and the impact of sections 28–29 LRA 2002 on priorities.
• The duty to disclose overriding interests (s.71 LRA 2002) and the use of notices and restrictions to preserve priority.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following interests cannot override a registered disposition under Schedule 3 LRA 2002?
   1. A legal lease granted for a term of five years.
   2. A restrictive covenant protected by notice on the register.
   3. An equitable interest belonging to a person in actual occupation (subject to exceptions).
   4. An implied legal easement that is obvious on a reasonably careful inspection.
2. For an interest to override under Schedule 3, paragraph 2 LRA 2002 (actual occupation), which two elements must be present?
   1. A legal interest and physical presence.
   2. A proprietary interest and actual occupation at the time of disposition.
   3. A personal right and continuous occupation.
   4. An equitable interest and the purchaser having notice.
3. A person buys a registered freehold property. They discover the neighbour has been using a clearly visible track across the property for the last 15 years without permission. The neighbour's right was not mentioned on the register. Is the purchaser likely bound by this right of way?
   1. No, because the right was not registered as a notice.
   2. Yes, if it is a legal easement acquired by prescription and obvious on inspection.
   3. No, because easements must be expressly granted to bind purchasers.
   4. Yes, but only if the purchaser had actual knowledge of the use before buying.

Introduction

The system of registered land, primarily governed by the Land Registration Act 2002 (LRA 2002), aims to provide a clear and comprehensive record of land ownership and the rights affecting it. This is often referred to as the 'mirror principle' – the register should accurately reflect the reality of the title. However, certain interests can bind a purchaser of registered land even though they are not recorded on the register. These are known as 'unregistered interests which override' or, more commonly, 'overriding interests'. Understanding these interests is important because they represent a significant exception to the general principle that a purchaser takes free from any rights not entered on the register. This article focuses on those interests which override registered dispositions under Schedule 3 LRA 2002.

In registered land, priority is governed by sections 28–29 LRA 2002. A purchaser for valuable consideration takes subject only to registered charges, protected registered interests, and overriding interests listed in Schedule 3. The doctrine of notice has no role in registered land priorities. As a result, knowing which rights are overriding and when they qualify is central to assessing whether a buyer or mortgagee is bound.

Key Term: Overriding Interests
Proprietary rights that bind a purchaser of registered land even though they are not protected by an entry on the register of title.

OVERRIDING INTERESTS UNDER LRA 2002

The LRA 2002 categorises overriding interests into two lists: those which override first registration (Schedule 1) and those which override a registered disposition (Schedule 3). A registered disposition typically refers to the transfer or creation of an interest (like a sale or a mortgage) relating to land whose title is already registered. Our focus here is on Schedule 3, which affects purchasers acquiring already registered land.

The policy behind allowing certain interests to override without registration often relates to the practicality or desirability of registration. Some rights, like short leases, are common and numerous, making registration burdensome. Others, like the rights of those in occupation, may be discoverable by physical inspection of the land. The LRA 2002 aimed to reduce the number and scope of overriding interests compared to the previous LRA 1925, enhancing the reliability of the register. A number of historic miscellaneous rights ceased to be overriding in October 2013 and now require protection by notice if they are to bind purchasers (e.g., manorial rights and chancel repair liabilities), reflecting the policy to narrow overriding categories.

A practical consequence is that, on a transfer for value, section 29 LRA 2002 gives the buyer a “special priority” position: any third-party interests not registered (unless overriding) lose priority against the buyer upon registration of the disposition. Equitable interests and express legal easements created after 13 October 2003 which are not properly protected are particularly vulnerable.

CATEGORIES OF INTERESTS WHICH OVERRIDE REGISTERED DISPOSITIONS (SCHEDULE 3 LRA 2002)

Schedule 3 LRA 2002 details the specific categories of interests that override subsequent registered dispositions (e.g., sale, charge) of the registered estate. We will examine the most significant categories for the SQE1 exam.

Legal Leases Not Exceeding Seven Years (Paragraph 1)

This category covers most short legal leases.

Key Term: Legal Lease
A leasehold estate created with the necessary formality (usually a deed, unless the parol lease exception applies) that is capable of existing as a legal estate under s.1(1)(b) LPA 1925.

Paragraph 1 provides that a legal leasehold estate granted for a term not exceeding seven years will override a registered disposition. This includes:

• Fixed-term leases granted for seven years or less.
• Periodic tenancies (weekly, monthly, yearly etc.), as each period is treated as a lease for that duration.
• Legal leases arising under the 'parol lease' exception in s.54(2) LPA 1925 (leases taking effect in possession, for three years or less, at the best rent reasonably obtainable, without taking a fine).

These short legal leases bind a purchaser without registration. In contrast, legal leases for more than seven years must be substantively registered (s.27(2)(b) LRA 2002) and will not operate at law until registered. Where a registered estate is already subject to a short legal lease, the buyer is bound even if they were unaware of it, because Schedule 3 gives overriding effect to such short leases.

Certain leases are excluded from overriding status even if their term is seven years or less. Examples include:

• Leases that are required to be substantively registered despite their short term (for instance, where a lease is granted to take effect in possession more than three months after the grant).
• Some specialist social housing arrangements are subject to particular statutory regimes; where statute requires registration, overriding status may not apply.

Periodic tenancies and informal occupancies can also be overriding if they satisfy the legal lease requirements. A periodic tenancy created without deed can still be a legal lease protected by Schedule 3, provided it falls within s.54(2) LPA 1925 and is in possession at best rent.

Worked Example 1.1

Aisha grants Ben a legal lease of a registered flat for five years by deed. Ben moves in. Aisha then sells the freehold reversion to Chen, who registers as the new proprietor. Chen was unaware of Ben's lease as it was not noted on the register. Is Chen bound by Ben's lease?

Answer:
Yes. Ben has a legal lease granted for a term not exceeding seven years. Under Sch 3, para 1 LRA 2002, this lease is an overriding interest and binds Chen, the purchaser, despite its absence from the register.

Key Term: Proprietary Interest
A right relating to land which has the character of property, as opposed to a purely personal right. Examples include beneficial interests under a trust, options to purchase, or equitable leases. Personal rights, like licences, do not qualify.

Key Term: Actual Occupation
Requires physical presence on the land, which must have a degree of permanence and continuity. It is a question of fact in each case.

Interests of Persons in Actual Occupation (Paragraph 2)

Schedule 3, paragraph 2 protects proprietary interests of persons in actual occupation. It is important to keep the two limbs distinct:

• There must be a proprietary interest (legal or equitable). Licences are insufficient because they are personal rights.
• The holder of that interest must be in actual occupation at the time of the disposition (assessed pragmatically by the courts). The key moment for this category is the time of completion of the disposition, not the later date of registration, although the right crystallises for priority when the buyer is registered.

Actual occupation is a flexible factual concept. The courts look for physical presence with some degree of permanence and continuity. Short-term absences can still be compatible with actual occupation if there is an intention to return and clear evidence of occupation (such as furniture, possessions, or ongoing control). Cases demonstrate that:

• Ordinary residence readily satisfies actual occupation.
• Longer involuntary absences can still qualify where there is a continuing connection (e.g., possessions left, regular visits, arrangements showing control).
• Purely intermittent presence without any residential use or control may not be enough.

A person with a proprietary interest (commonly an equitable interest under a trust arising from financial contribution) who is in actual occupation at completion can claim overriding status against a buyer or mortgagee unless one of the statutory exceptions in paragraph 2 applies. Priority is then preserved by section 29 LRA 2002.

Timing and the “Registration Gap”

Although title passes at registration, case law has established that to rely on actual occupation, the occupation must exist at the time of completion of the disposition. If the occupier only moves in after completion, they will not secure overriding status under paragraph 2 for that disposition. This reduces the risk of the buyer being bound by interests that arise during the gap between completion and registration.

What counts as “actual occupation”?

The threshold is fact-sensitive. Indicators include living at the property, leaving possessions there, exercising control, and continuity. Boarding elsewhere temporarily or being absent for medical or safety reasons does not necessarily negate occupation if there is a sustained link and a plan to return. Conversely, long-term removal of possessions, cessation of visits, and treating the property as vacant undermines occupation.

Exceptions under Paragraph 2

Even if a person has a proprietary interest and is in actual occupation, the interest will not override in two specific situations:

1. Failure to disclose: If inquiry was made of the person claiming the interest before the disposition, and they failed to disclose the right when they could reasonably have been expected to do so (Sch 3, para 2(b)).
2. Occupation not obvious AND purchaser lacks knowledge: If the person’s occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, AND the person acquiring the interest (the purchaser) did not have actual knowledge of the interest at that time (Sch 3, para 2(c)). Both parts of this condition must be met for the exception to apply.

This second exception aims to protect purchasers from undiscoverable rights. If occupation is obvious, the purchaser is expected to make inquiries. If occupation is not obvious, the interest only binds if the purchaser actually knew about the interest.

“Inquiry” should be meaningful and directed to the occupier or someone able to speak to their rights. Casual conversations in unsuitable settings may not suffice. An inspection must be reasonably careful; a cursory glance at the exterior could be inadequate when interiors or clear signs of occupation warrant investigation.

Worked Example 1.2

David holds the registered freehold title to a house. His partner, Chloe, contributed significantly to the purchase price, giving her a beneficial interest under a trust. Chloe lives in the house with David. David secretly mortgages the house to Bank plc. The Bank did not inspect the property before advancing the loan. Is the Bank bound by Chloe’s interest?

Answer:
Yes, likely. Chloe has a proprietary interest (beneficial interest under a trust) and is in actual occupation. Her occupation would likely be obvious on a reasonably careful inspection. As the bank did not inspect, they cannot rely on the exception in Sch 3, para 2(c). Chloe's interest overrides the bank's registered charge. (Note: This assumes Chloe's interest was not overreached)

Worked Example 1.3

Same facts as Example 1.2, but assume Chloe was temporarily staying with her sick mother for two weeks when David granted the mortgage and when the Bank's surveyor briefly inspected the exterior only. Chloe's clothes and possessions remained in the house. The Bank's surveyor saw no signs of female occupation from the outside. The Bank had no actual knowledge of Chloe's interest. Is the Bank bound?

Answer:
This is more complex. Chloe likely remains in actual occupation due to her intention to return and presence of belongings. However, if her occupation was not obvious on a reasonably careful inspection (which might be argued given the surveyor's limited inspection and absence of obvious signs), AND the Bank had no actual knowledge of her interest, then her interest would not override under Sch 3, para 2(c). The outcome depends on the specific facts regarding the 'obviousness' of her occupation.

Worked Example 1.4

Amira signs a compliant written contract for a four-year lease of a shop (equitable lease). She moves in and begins trading. The landlord sells the freehold to Buyer Co. without any entry on the register protecting Amira’s equitable lease. Is Buyer Co. bound?

Answer:
Yes, likely under Sch 3, para 2. Amira has a proprietary interest (equitable lease) and is in actual occupation at the time of the disposition. Although equitable leases do not fall within Sch 3, para 1, they can still override via Sch 3, para 2 if the occupier’s proprietary interest and occupation are established and no exception applies. Buyer Co. should have discovered her occupation on inspection and made enquiries.

Exam Warning

Remember that beneficial interests under a trust, while potentially overriding under Sch 3, para 2, can be overreached if the disposition (e.g., sale or mortgage) involves payment of capital money to at least two trustees or a trust corporation (ss. 2 & 27 LPA 1925). If overreaching occurs, the beneficial interest detaches from the land and attaches to the money paid, meaning it cannot override the purchaser's or mortgagee's interest, regardless of actual occupation. Always check if overreaching applies, especially when there are two or more legal owners involved in the transaction.

Overreaching ensures the transferee takes free from equitable interests that are capable of being quantified in money (e.g., beneficial co-ownership shares), provided the statutory conditions are satisfied. A classic illustration is City of London Building Society v Flegg: although the parents were in occupation and had a beneficial interest, payment to two trustees meant their interest was overreached and did not bind the mortgagee.

Legal Easements and Profits à Prendre (Paragraph 3)

This paragraph provides limited overriding status for certain legal easements and profits à prendre.

Crucially, paragraph 3 does not apply to legal easements or profits that were expressly granted or reserved out of a registered estate after 13 October 2003. These require registration under s.27 LRA 2002 to be legal and binding. If they are not completed by registration, they are only equitable and will not override; they would need a notice to bind a purchaser for value.

Paragraph 3 primarily protects:

• Legal easements or profits created by implication (e.g., by necessity, common intention, under Wheeldon v Burrows, or s.62 LPA 1925).
• Legal easements or profits acquired by prescription (long use).

These types of legal easements/profits will override a registered disposition only if one of the following conditions is met:

• The easement/profit would have been obvious on a reasonably careful inspection of the land; OR
• The person entitled to the easement/profit proves it has been exercised in the period of one year ending with the day of the disposition; OR
• The easement/profit was known about by the person to whom the disposition was made (actual knowledge).

An easement/profit registered under the Commons Registration Act 1965 also overrides, but this is rare. Equitable easements cannot override under this paragraph; they require protection by notice. In practice, most implied legal easements that are actively used or visibly apparent will satisfy one of the conditions and therefore override.

Worked Example 1.5

A builder sells part of a registered plot, retaining a lane that has long been used to access the sold land. The transfer omits any express right of way. The buyer later sells the land to Nina. The lane is clearly marked and used weekly to reach the public highway. There is no entry on the register. Can Nina insist on using the lane?

Answer:
Yes. A legal easement may arise by implication (Wheeldon v Burrows or s.62 LPA 1925, depending on the facts), and it is obvious on a reasonably careful inspection and has been exercised within the year prior to disposition. Under Sch 3, para 3, such an implied legal easement overrides the registered disposition and binds Nina’s seller and Nina’s title.

Worked Example 1.6

Leo has used a track over his neighbour’s registered land daily for 20 years without permission to reach his fields. The track is clearly visible. On a sale to Priya, there is no register entry of any easement. Is Priya bound?

Answer:
Yes, if the use has ripened into a legal easement by prescription, and it is obvious on inspection or was exercised in the year prior to the sale. Sch 3, para 3 gives overriding status to implied/prescriptive legal easements if one of the conditions is met. Priya takes subject to the right despite the absence of a notice.

Revision Tip

The scope of Schedule 3, paragraph 3 is narrow. It excludes expressly created legal easements (which need registration) and all equitable easements (which need protection by notice). It mainly saves certain implied and prescriptive legal easements from being defeated by a sale, provided one of the specified conditions (obviousness, recent use, or actual knowledge) is met.

Limits and Practical Pitfalls

• If an easement is expressly granted or reserved out of registered land post-13 October 2003, it must be completed by registration to be legal and binding. Failure to register usually leaves only an equitable right which cannot override.
• Equitable easements cannot be “converted” into overriding interests via actual occupation: the dominant owner typically does not occupy the servient land, and using an easement does not amount to actual occupation of that land.
• Many long-standing, visible uses will be discoverable. A prudent purchaser inspects and enquires to avoid unpleasant surprises.

DISCLOSURE AND PROTECTION OF OVERRIDING INTERESTS

While overriding interests bind purchasers without registration, the LRA 2002 encourages their entry onto the register to improve the accuracy of the mirror principle. Under section 71 LRA 2002, applicants for registration (e.g., a purchaser applying to register their transfer) have a duty to disclose any overriding interests of which they are aware. If disclosed, the Land Registrar can then note these interests on the register, usually by way of a Notice. Once noted, the interest ceases to be overriding and binds simply because it is registered. However, failure to disclose does not prevent a qualifying interest from overriding.

Not all interests can be protected by notice. Section 33 LRA 2002 prohibits notices for certain rights (e.g., interests under a trust of land and lease covenants relating to the demised premises). Trust interests are instead indirectly protected by restrictions (for example, a Form A restriction preventing registration of dispositions by a sole proprietor where capital money arises unless authorised).

Protective registration is essential for equitable interests that cannot override:

• Equitable easements and profits require notices to bind purchasers for value.
• Restrictive covenants burdening freehold land should be protected by notice on the charges register.
• Estate contracts (options, rights of pre-emption) need notices to preserve priority.

Practical conveyancing steps minimise the risk of undisclosed occupiers’ rights:

• The seller’s Property Information Form should identify occupiers and third-party rights.
• Buyers and lenders should physically inspect the property and make targeted enquiries of occupiers.
• Lenders typically obtain written occupier consents to avoid later claims to priority.

Summary

• Overriding interests bind purchasers of registered land despite not being on the register (LRA 2002, Sch 3).
• Short Legal Leases (Sch 3, para 1): Legal leases granted for 7 years or less generally override. Periodic tenancies and parol leases can qualify.
• Actual Occupation (Sch 3, para 2): Protects proprietary interests of those in discoverable actual occupation at the time of disposition, unless specific exceptions apply (failure to disclose on enquiry, or occupation not obvious and purchaser lacks actual knowledge). Overreaching can defeat these interests even if occupation is present.
• Certain Legal Easements (Sch 3, para 3): Implied and prescriptive legal easements/profits override if obvious on inspection, known to purchaser, or recently exercised. Express legal easements created post-2003 require registration. Equitable easements require a Notice and cannot override.
• The distinction between first registration (Schedule 1) and registered dispositions (Schedule 3) matters: Schedule 3 is narrower to protect purchasers for value under s.29 LRA 2002.
• Section 71 LRA 2002 imposes a duty to disclose known overriding interests at registration, enabling protective entries that convert overriding status into registered protection.

Key Point Checklist

This article has covered the following key knowledge points:

• Overriding interests are rights binding on registered land without appearing on the register.
• They are an exception to the 'mirror principle' of land registration.
• Schedule 3 LRA 2002 lists interests overriding registered dispositions.
• Key categories include short legal leases (≤ 7 years), interests of persons in actual occupation, and certain implied/prescriptive legal easements/profits.
• Short legal leases generally override; legal leases over seven years require substantive registration.
• Actual occupation requires a proprietary interest plus sufficient physical presence at the time of disposition; assess “obviousness” and buyer’s actual knowledge.
• Exceptions to overriding status via actual occupation exist (non-disclosure on enquiry, non-obvious occupation + no actual knowledge).
• Overreaching (payment to two+ trustees or a trust corporation) defeats beneficial interests under trusts, even if coupled with actual occupation.
• Implied/prescriptive legal easements override only if specific conditions (obvious, known, recent use, or Commons registration) are met; express post-2003 legal easements and equitable easements require registration/notice for protection.
• Section 71 LRA 2002 encourages disclosure and protective entries; certain interests cannot be protected by notice and use restrictions instead.

Key Terms and Concepts

• Overriding Interests
• Legal Lease
• Proprietary Interest
• Actual Occupation